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KLA-Tencor Practicing Patience

KLA-Tencor (KLAC - Get Report) CFO John Kispert says his company is prepared for any antitrust issues that may surround a possible takeover of August Technology (AUGT), despite its target's cries to the contrary.

"We're comfortable, otherwise we wouldn't be pursuing this," Kispert said during an interview at the company's San Jose, Calif., headquarters last week.

KLA-Tencor has held the wild-card role during the past six months as August first scuttled a merger with Nanometrics (NANO - Get Report) and then inked a deal with Rudolph Technologies (RTEC - Get Report).

But the Nanometrics and Rudolph transactions both represented below-market takeout prices. August announced last week a merger with Rudolph at a price of $10.50 a share, even though August hasn't closed below $10.50 since mid-February.

KLA-Tencor has offered to pay $11.50 in cash for August but has also said it could use stock instead. August executives have cited potential regulatory hurdles as a primary barrier to doing a deal with KLA-Tencor.

However, Kispert said KLA-Tencor is working with the Department of Justice regarding its bid for August, while noting that KLA-Tencor has cleared regulatory obstacles for past acquisitions.

The fight for August -- now in its sixth month -- doesn't seem to be close to ending. August and Rudolph have only just begun the process of regulatory filings and antitrust reviews, with a shareholder vote not occurring until after that.

It's that vote that will likely be the toughest hurdle to overcome for August. The trading pattern of the company's stock indicates that investors are expecting even more than KLA-Tencor's high bid from August's ultimate buyer. The recent spate of buying in August shares has lifted the stock as high as $12. They closed Monday at $11.89.

As for breaking apart the Rudolph/August deal, the companies set a $7.74 million breakup fee, less than the termination penalty of $8.3 million triggered to end the Nanometrics deal.

Kispert says he wasn't surprised by August's deal with Rudolph, but he maintains that KLA-Tencor still has the interest and ability to acquire August, regardless of how long it takes. "We do not want to dawdle, but we need to be patient to do this correctly," said Kispert.

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